Legal Realism Jerome Frank

Law is the Art of Prediction The story begins with the following facts. The Jones family owns the Blue and Gray Taxi Company (BG) (incorporated in Kentucky). BG had an exclusive contract with the A & B Railroad to get customers next to the depot.

A rival taxi company, Purple Taxi (PT), started to ignore that exclusive right. The Purple taxi had its taxis located in areas already assigned to the Blue and Gray company. This created a conflict as PT tried to attracted business away from BG. The loss in profit from BG caused the Jones family to seek legal help.

The lawyer said that the contract is not legally valid, because such an agreement constitutes a monopoly according to several decisions of the highest court of Kentucky.

The lawyer thought about the matter and figured out how to get the contract to work in Kentucky. In the majority of other states than Kentucky (and a few like it), one can have an exclusive agreement to solicit business. If the case can be tried in federal court, then the judges will follow the “majority rules” principle and rule in your favor.

The lawyer proposed that BG open up and register as a Tennessee company. The railroad issued a new exclusive contract to BG. The legal system now would consider BG as a citizen of Tennessee and the PT and the railroad as citizens of Kentucky. BG would be able to bring suit in federal court against PT.

Federal court has jurisdiction over lawsuits of citizens from different states. The lawyer is not 100% sure the plan will work because there is no precedent set involving lawsuits with the exact details as this case.

Did the plan work? The court ruled that a suit was legitimate and that the contract was valid. The Federal Circuit Court of Appeals affirmed the decision of the lower court. The case was appealed all the way up to the Supreme Court of the United States.

The Supreme Court ruled 6 to 3 in favor of BG and the Jones won. What is the LAW for the Jones and PT? Answer: it depends on the date: before the Tennessee-based BG was formed or after ?

Before BG moved to Tennessee the law was that exclusive contracts to solicit business constitute monopolies and are therefore, illegal. After BG moved to Tennessee, such contracts are valid and not monopolies.

The law at any time before the Supreme Court decides an issue is unsettled.

For any particular lay person, the law, with respect to any particular set of facts, is a decision of a court with respect to those facts so far as that decision affects that particular person. Until a court has passed on those facts no law on that subject is yet in existence. Prior to such a decision, the only law available is the opinion of lawyers as to the law relating to that person and to those facts. Such opinion is not actually law but only a guess as to what a court will decide.

Or more formally… Law, then, as to any given situation is either (a) actual law, i.e., a specific past decision, as to that situation,' or (b) probable law, i.e., a guess as to a specific future decision. ???

Frank says ask these questions to your lawyer and…. "Have I a right, as a stockholder of the American Taffy Company of Indiana, to look at the corporate books?" Or, "Do I have to pay an inheritance tax to the State of New York on bonds left me by my deceased wife, if our residence was in Ohio, but the bonds, at the time of her death, were in a safety deposit box in New York'!"

The answers (although they may run "There is such a right," "The law is that the property is not taxable," "Such picketing is unlawful," "The agreement is not legally binding") are in fact prophecies or predictions of judicial action. It is from this point of view that the practice of law has been aptly termed an art of prediction.

Legal Formalism A theory that legal rules stand separate from other social and political institutions.  According to this theory, once lawmakers produce rules, judges apply them to the facts of a case without regard to social interests and public policy.  In this respect, legal formalism differs from legal realism.  Either theory can be understood in a descriptive way, prescriptive way, or both ways at once. Source: http://www.law.cornell.edu/wex/legal_formalism

Legal Realism A perspective that legal rules are to benefit the larger society and public policy based on judicial decisions. Neither dogma or supernatural authority applies. A court is expected to determine ‘legal rights’ and ‘legal duties’. In the extreme, a judge considering rights of an accused, is in fact deciding what rights this judge is going to let the accused have. It is an absurdity, where the law is not applied. Source: Black’s Law Dictionary: http://thelawdictionary.org/legal-realism/#ixzz2sNQCx2il